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Let’s face it. Bad credit – whether something terrible happened to you resulting in hospital bills or you just have a bad spending problem – can affect you any time you’re trying to open a new line of credit.
When it comes to the equity in your home, you’d think it would be easy to pull cash out of your property. After all, it’s YOUR equity, right?
Wrong.
Unfortunately, opening a home equity line of credit or refinance loan still depends on a lot of factors, including:
- Your income
- Current credit score
- Existing debt
- Earnings from previous years
- Property appraisal
- And more
Applying for any loan requires an in-depth application process, even if you are willing to put your house on the line as collateral. Banks need a lot of information before they are willing to lend to you.
Although you have very little control over a lot of these loan factors, the one thing you can improve is your credit score.
Let’s take a closer look at what you can do to improve your credit rating to help qualify for a loan or refinance.
Here’s What You Can Do to Improve Your Credit Score
If you are looking at ways to tap into the equity in your home, there’s probably a good reason you need the money.
Take this story about a woman named Sara for example. Sara’s mother transferred the title of her home to Sara just before she was moved into a nursing facility.
Eventually, Sara moved into the older house, which needed a lot of maintenance repairs. Over time, the repairs added up and she also needed to pay the nursing home bill.
Sara needed to access her home equity quickly if she was going to pay her bills on time. Unfortunately, her credit score suffered when she was previously unable to make a few of her student loan payments.
With bad credit and lack of stable income, Sara couldn’t find a bank that would lend on her home equity even though she was using the house as collateral.
In this situation, two things are working against Sara: bad credit, and not enough income.
Perhaps you find yourself in a similar situation.
No matter your circumstances – here are a few things you can do to improve your credit rating:
Check your credit report for mistakes – Checking your credit report is one of the easiest things you can do. If there are any mistakes or debts that aren’t yours, get those corrected and see if they improve your credit score.
Pay off existing debt – If you have a lot of accounts with small balances you can pay off, pay them off. The fewer revolving accounts you have with debt, the better your credit score will be.
Always make regular payments – If you have any account with a balance due, make sure you make at least the minimum payment. If you always make a certain payment amount and suddenly miss or start making smaller payments, that can also send a red flag to lenders. Keep your habits routine and predictable.
Don’t spend up to your limit – One of the most important factors lenders look at is how much of your credit limit you use in any given month. It’s advisable to keep spending at or below 30% of your credit limit for optimal credit rating.
As you can see, many of these credit factors require time and dedication to prove reliable behavior banks will view as safe to lend on.
But what if you need access to your home equity right away?
What Else Can I Do If I Have Bad Credit and Need to Access Equity in My Home?
When improving your credit score isn’t enough to qualify you for a home equity loan or refinance, you can try to change some of the other factors banks look at.
If possible, earn more. Lenders typically ask for 2 to 3 of your previous pay stubs and consider that as your income. They also ask for tax returns from previous years.
Although you have little control over how much you earned the year before, you can make sure you earned well in the weeks or months immediately before applying for a home equity loan.
However, earning more may not always be an option. Often times, people already strive to earn as much as they can. Taking on a second job is not always an option or a guarantee that you will qualify for a loan either.
Luckily, there is one option available you may not have considered yet that is quick, easy, and gets you the cash you need immediately.
You can consider selling your home for cash, allowing you to pay off whatever you need to.
You won’t own your home anymore, but you may discover the financial freedom you need.
Here’s how to sell your home for cash the right way.
Find a Texas Investor to Buy Your Home Without Getting Ripped Off
Selling your home for cash is a huge financial decision that has lasting impact. It’s not something to choose lightly, but sometimes circumstances require you to make tough choices.
When you sell your home for cash, you can sell it as-is meaning you won’t have to worry about maintenance or repairs. You can also skip the real estate fees which are generally 5-6% of the total sale.
Depending on the market, selling your home through the traditional method with a real estate agent depends on a lot of invisible factors. You risk having to wait for months before a sale goes through.
When you sell your home for cash, it happens quickly (think: days, not weeks) so you don’t need to wait.
The most important part is finding the right investor who won’t take advantage of your situation by giving you a lowball offer.
Make sure you work with someone who offers fair prices and has a reputation as an honest, reputable home buyer.
If you live in the Austin area in Texas, try Jerred Buys Austin Houses. Jerred understands homeowners value their properties and works hard to offer the best prices and always engages in ethical practice.
When a home equity loan or refinance isn’t an option, choose the right investor to sell your home for cash.
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